Case Digest: R (On the application of Eastenders Cash and Carry plc and others) (Respondents) v The Commissioners for Her Majesty's Revenue and Customs (Appellant) and R (on the application of First Stop Wholesale Limited) (Appellant) v The Commissioners of Her Majesty's Revenue and Customs (Respondent) [2014] UKSC 34

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Whether, and in what manner, goods are detainable under the Customs and Excise Management Act 1979 ("the 1979 Act") where it is suspected duty has or may not have been paid

Lord Sumption and Lord Reed handed down a unanimous judgment, Lords Mance, Neuberger and Carnwath concurring, in the case of R (On the application of Eastenders Cash and Carry plc and others) (Respondents) v The Commissioners for Her Majesty's Revenue and Customs (Appellant) and R (on the application of First Stop Wholesale Limited) (Appellant) v The Commissioners of Her Majesty's Revenue and Customs (Respondent) [2014] UKSC 34, on 11th June 2014. Both appeals were brought to contest the Commissioner's power of detention of goods under the 1979 Act.

The Eastenders Appeal

In Eastenders customs officers entered the company's warehouses, where they proceeded to inspect consignments of alcohol found there, pursuant to section 118C(2) of the 1979 Act (now repealed). This provision granted them the power to "enter and inspect business premises which they had reasonable cause to believe were being used in connection with the supply, importation or exportation of goods chargeable with excise duty and to inspect any goods found there".

Eastenders' employees were unable to produce documents showing that duty had been paid, as required under section 118B. Documents produced indicated duty may not have been paid and therefore the goods were detained subject to the outcome of further enquiries.

The Commissioners subsequently stated that the goods were detained under section 139 of the 1979 Act, permitting officers to "seize or detain anything liable to forfeiture under the customs and excises Acts". Goods which were not immediately seized, staying on Eastenders' premises, were instead subject to a section 139(5) direction. A vast quantity of stock was never returned following enquiries – the remainder was returned as tests proved inconclusive.

In the High Court, the Eastenders application for judicial review of the decision to detain goods subsequently returned was dismissed by Mr Justice Sales. The Commissioners had reasonable grounds to suspect the goods might be liable to forfeiture, holding the power under section 139(1) to detain them for a reasonable time pending enquiries.

In the Court of Appeal a majority judgment reversed the decision of the High Court, holding that it had not been established that the goods in question were liable to forfeiture under section 139(1), rather they were unlawfully detained. Section 139(1) only applied where goods were actually liable to forfeiture. The Commissioners appealed to the Supreme Court against this decision.

The First Stop Appeal

In First Stop, a warehouse and retail premises used by the appellant was entered by customs officers in line with section 112(1) of the 1979 Act, permitting entry to the premises of "revenue traders" to search for and examine any goods or materials connected with that trade. Documents were examined under section 112A.

A small quantity of spirits was seized on the ground that "duty paid" stamps were defective, while a larger amount was detained because its provenance was unclear. The goods were detained pending evidence of duty status, written notice being furnished to that effect.

As with Eastenders, the majority of stock was seized post-detention, the other element being returned to First Stop.

Having successfully applied for judicial review of the decision to detain the goods, it was held in the High Court by Mr Justice Singh that detention was unlawful when the reason given was the need for investigation, following the reasoning of the Court of Appeal in Eastenders.

He also held that Commissioners were not protected from an order for costs by section 144(2) of the 1979 Act because of the unlawful nature of the act.

In the Court of Appeal, however, Beaston LJ was critical of Mr Justice Singh's interpretation. The Eastenders decision had the effect that if goods were liable to forfeiture, detention for a reasonable time was lawful irrespective of the reasoning for it. He allowed an appeal against the High Court's second judgment. The judge's decision was inconsistent with the Court of Appeal's decision in its second judgment in the Eastenders case.

Judgment

Handing down judgment in the Supreme Court, Lords Sumption and Reed took much consideration over the statutory framework in place. They held that the right to seize or detain property under section 139(1) is dependent on the property actually being liable to forfeiture under one of the various provisions of the Act.

This assessment turns on objective facts, rather than the subjective opinion of the officer(s) dealing with the case, as can be gleaned when considering other provisions in the Act concerning powers. Without an objectively defined power, the seizure would prove to be unlawful where suspicions proved unfounded.

Additionally, their Lordships recognised the long-standing power of customs officers to examine goods to determine whether duty was payable and thus if they were liable for forfeiture. The Customs and Excise Act 1952, retained the common law power of detention, unconditional upon the goods' liability for forfeiture. This is a power "obviously essential to the effective implementation of the laws governing customs and excise".

It was decided that the officers in Eastenders were entitled to seize and detain the goods for a reasonable period, so as to enable them to complete their enquiries into whether duty had been paid when they suspected it had not been.

In First Stop the power of examination under section 112(1) was not completed until the necessary enquiries had been made. Implied within this provision was an ancillary power of detention for a reasonable time, as found in Eastenders.

As an aside, the judges posed the question of whether the passing of section 275(1) of the 1952 Act consolidated by section 139(1) of the 1979 Act, creating an express statutory power to detained goods liable to forfeiture, had the effect to abolish the power of detention that arose by necessary implication from statutory powers of examination. They held it did not.

Appeal unanimously allowed in Eastenders, the first of the appeals brought by First Stop dismissed, the second on costs allowed.

Decisions on costs set aside. The parties were invited to make submissions on costs to be considered by the Court on a proper basis.

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